Sweeping Generalizations, Unsupported Statements, Conjecture, Speculation
Ahmad Faruqui is an economist and a principal with The Brattle Group based in San Francisco. The views in this essay are his own and not those of Brattle. He would like to acknowledge the assistance of Phil Hanser and Cody Warner in writing this review. Comments can be directed to email@example.com.
The public only pays attention to the grid when the power goes out, a new transmission line threatens to run too close to their house or when it obscures the visibility of a landmark. The public expects that when they flip the switch, the bulb will light up, regardless of the time of day.
The challenges facing the grid have long been analyzed and discussed by engineers and economists and policy wonks of all stripes. But these discussions in scholarly and trade journals are often couched in technical language and arcane jargon that makes them inaccessible to the public.
Gretchen Bakke, who teaches cultural anthropology at McGill University in Montreal, has sought to resolve this gap in knowledge by appropriately meditating on the grid in her new book.1
A native of Portland, Oregon, she obtained a bachelor’s degree in Russian and Soviet Studies and Photography from Evergreen State College in Olympia, Washington. She also obtained a master’s degree in Russian and East European Studies from Indiana University before obtaining a doctorate from the University of Chicago. Her dissertation was on Contemporary Slovene Art and Artifice.
This background guarantees that we will get a fresh perspective on the subject. Unsurprisingly, the book has favorably garnered the attention of The Wall Street Journal and Canada’s National Post, and the author has been interviewed on National Public Radio.
Bakke gives the grid the broadest meaning which encompasses not just the transmission and distribution systems with which the term is commonly associated. She also gives meaning to the power plants which generate the electricity.
Appropriately, she avers that the grid is “a complex and expansive electrical delivery system that we care little for and think even less about.”
The book covers the evolution of the industry from Edison’s Pearl Street station in Manhattan. (There is also some early discussion of the years that preceded it. This includes an assertion that the grid first manifested itself in 1879 in San Francisco.) It also includes Samuel Insull’s Chicago Edison (today’s Commonwealth Edison).
She shows that in the beginning of the electric industry, there were several hundred isolated grids which eventually interconnected and became the three regional grids that cross the country.
She discusses in some detail the large power outages that occurred in 1965, 1977, 1987, 1994 and 2003, and the economic harm they caused the nation.
Then she goes on to say that the current move toward more sustainable energy solutions will require “a serious reimagination of the grid. The more we invest in ‘green’ energy, the more fragile our grid becomes.”
Along the way, she guides the reader through the physics and engineering of how electricity flows from the power plant to the end user’s appliances, buildings and industrial processes. These discussions are written in plain English and supplemented with simple diagrams and illustrations.
They explain, for example, the difference between series circuits and parallel circuits. The style is conversational, not turgid. Unlike many other popular works on the subject, she does not confuse electricity with electrons but with the movement of electrons. “This flow of electrons is still doing work every time it passes through a machine.”
Bakke makes some very valid points. The grid is aging and in significant need of an upgrade in the face of new technologies which customers and producers now want to attach to it.
She says that “the grid is worn down, it’s patched up, and every hoped-for improvement is expensive and bureaucratically bemired.” Massoud Amin, a professor of electrical engineering at the University of Minnesota, who has also worked at the Electric Power Research Institute, is quoted for good measure for support of her views.
The grid was designed to move electricity from the power plant to the customer and not designed to do the reverse. It was not designed to move electricity from one customer to another via the grid. This is a phenomena arising from the emergence of customer-owned generation. It’s so-called distributed energy resources, such as rooftop solar photovoltaic panels.
Many customers are becoming increasingly organic and green in their tastes. This means that they are becoming more energy efficient and likely to consume less electricity. This creates a revenue shortfall for the utility. It must recover by raising rates, creating the scenario which is commonly called the utility death spiral.
The book recognizes the challenges created by the need to integrate renewable energy into the grid, arising largely from the intermittent character of these resources. It also recognizes the grid’s need to provide power whenever demanded of it.
It speaks to the issues created by net energy metering in the presence of volumetric rates since it causes “the bills of … customers without solar to rise precipitously.” Bakke adds later in the book, “American utility companies cannot maintain the transmission and distribution systems on our grid by charging solely for how much electricity they individually consume.” 2
Elsewhere, she acknowledges the challenges posed by a slow regulatory process. “And though many [utilities] are now scrambling to find new ways of generating revenue, they are hamstrung at every moment by a regulatory structure that impedes quick changes and trial balloons.”
That slow pace of change is a result of the regulator’s approach to meeting their responsibility to the public. Their cautiousness is founded in the view that changes to the grid’s rules will undoubtedly have long-term effects and could be expensive.
While all this is well known to industry experts, there is a lot to be said for getting these ideas and issues across to the public at large. New regulatory commissioners and analysts are drawn from this public, as well as current and future legislators, governors and presidents.
Clearly, much effort went into the writing of the book. Of its three hundred fifty-two pages, forty-seven pages are devoted to documenting her claims in end-notes. 3
However, for a book aimed at educating the public about the grid, the tone of the book seems overly strident at times. Bakke frequently attacks electric utilities as obsolete institutions. She constantly asserts her seemingly strongly-held belief that utilities will not be able to save themselves.
She also asserts that people are so upset with the erratic functioning of the grid that they want to make the power themselves. She states that grid defection is increasingly likely.
She does not realize that the vast proportion of reliability issues are a result of the grid’s weakest link, the distribution system. It’s not the much more massively sized transmission system and generation components. Indeed, the concern of the regional transmission systems’ operators is how much additional risk for outages will be created by the large scale deployment of intermittent resources.
She says she has spoken to people who have “consistently reiterated the view that electricity was a basic human right. It was something the government should ensure all people had access to just like potable water or breathable air.”
Then comes the most telling sentence in the book. “This is also my view.” This seems to be the raison d’etre for writing the book.
Bakke says that over the past century, “The utilities managed the grid, they made the power, they owned the wires, they distributed electricity, and they collected the money.” Fair enough.
But then she goes on to say, referring to the Public Utility Regulatory Policies Act which was passed in 1978, “The law prevented other electricity makers (by dint of not providing a license) from building their own distribution networks and entering into competition with the existing utility.”
Well, to this day no one has been able to make a case for multiple distribution networks. That function remains a natural monopoly. 4
In her eyes, the utilities are trapped in an existential dilemma. “The utilities don’t know how to upgrade existing technology without putting themselves out of business. Nor do they know how to continue with the existing infrastructure without going out of business.”
Furthermore, “The utilities’ panic is real; it’s not aesthetic, not even greedy, and not particularly malicious. As improbable as it might seem, it’s real structural, organizational panic.”
This is too alarmist. No doubt the entire industry is in the process of redefining itself driven by the new technologies which hope to advantage themselves through use of the grid. Not just large scale wind and rooftop solar photovoltaic, but also electric vehicles and new storage technologies. Yet to be understood, and that could also have profound impacts on the grid, is the impact of long-term supplies of cheap natural gas.
There is an extensive discussion on what went wrong with Xcel Energy’s SmartGridCity in Boulder, Colorado. Yes, that project ran into insurmountable problems for all kinds of reasons and was shut down.
But the problem was not the workings of smart meters, smart appliances, smart thermostats or dynamic pricing. All of those have worked well in other pilots. No one requires customers to do their laundry at two a.m. and their vacuuming at midnight.
Bakke’s reference to these commonly-held fears simply perpetuates the self-fulfilling prophecy that dynamic pricing is impossible to deal with. She cites a Boulder resident as saying, “To many consumers the Smart Grid means that some bureaucrat will turn off their air conditioner when it is very hot outside.”
As far as I know, no one has turned off anyone’s air conditioner without their consent, unless a power outage occurs. Customers are incentivized to adjust their thermostat settings by a couple of degrees and it is entirely up to them whether they do so or not.
Oklahoma Gas and Electric is running a very successful program where dynamic pricing is coupled with smart thermostats, and has signed up a fifth of its customers on the program. Furthermore, Arizona Public Service has signed up half of its customers on a time-of-use rate program without providing them any enabling technology.
Smart meters are also a focus of her animus since, in her view, utilities are installing them to take “control over home air-conditioning, and why they prefer we all vacuum at midnight.” That Orwellian view simply does not comport with reality.
No utility that is deploying smart meters is on such a mission. What largely motivates utilities to install smart meters is:
1. Improving response times for customer outages by knowing who has lost service. Without smart meters that is largely reasonable inference and guesswork.
2. Reducing costs for meter reading and other meter services.
3. Providing energy management tools to customers such as web portals that display hourly load profiles so that they can make smart decisions on how to manage their bills.
4. Providing customers with rates that actually reflect the costs the utilities incur to serve them.
Economists for years have urged the implementation of cost reflective-rates on the basis of providing customers’ prices that allow them to make the right energy consumption and investment decisions. But also as a means of mitigating the market power of generators.
Unfortunately, while forty percent of the meters are smart today, and some five to ten million are being installed annually, less than two percent of the customers are on a smart rate. When it comes to smart pricing, the train has not left the station.
After discussing several load control programs, some involving residential and some involving commercial and industrial customers, Bakke asserts, “In almost every case, the smart meter is what makes this voluntary ceding of control over household energy use to the utility possible. It is their primary weapon in softening peaks. And it’s begun to work.”
This is entirely false. She has confused smart-meter enabled smart rates with traditional direct load control programs and load curtailment programs which go back a half-century. None of them require smart meters or the smart grid.
She offers an erroneous discussion of the Bakersfield problem in which some households alleged that their bills had doubled after the installation of smart meters. A state senator seized upon this claim to breathe life into his gubernatorial ambitions through town hall meetings.
It was totally repudiated and conclusively rejected by a study carried out by the California Public Utilities Commission. She says that some customers were surprised to find that their electricity usage actually increased during a six-hour blackout while others found that they were paying more for electricity than for their rent.
“And though there has been a lot of quibbling as to why, nobody argues with the fact that with the new technology’s arrival, monthly electric bills doubled, or at times tripled.”
She seems to suggest that Pacific Gas and Electric offered multiple explanations, one of which was the presence of time-of-use rates. That could not possibly be the case since those customers were not on such rates at that time.
Then she goes on to perpetuate another myth, that smart meters impinge negatively on people’s health through electromagnetic radiation. This has been investigated. Smart meters have no health impacts.
The book is marred by several elementary mistakes. Southern California Edison has five million customers, not fourteen million. Wireless distribution is infeasible, demand-side management is not a new phenomenon enabled by smart meters (it goes back to the early 1980’s). There was no oil embargo in 1978, but a price spike did take place in 1979. The California energy crisis of 2000-01 caused a utility to go bankrupt and another one to nearly go bankrupt, unlike her assertion that two went bankrupt.
Unfortunately, a book which began on a promising note, takes its reader on a journey that abounds in sweeping generalizations, unsupported statements, conjecture and speculation.
The narrative is marred by invective. “[B]y the 1970s the utilities had ceased to live and function in the real world. …Their power had grown absolute, plodding, and blind…[T]he most risk averse and least facile minds were running the game.”
These statements bring into question the objectivity of the author. By the time I finished reading the book, the grid had become the grind.
1. Gretchen Bakke, The Grid: The Fraying Wires Between Americans and Our Energy Future, Bloomsbury Publishing, 2016.
2. Such as, that today’s rate designs will have to yield to more sophisticated, three-part rates which charge for capacity through kilowatt charges and for energy through kilowatt-hour charges.
3. The surprising omission is the lack of any references to the extensive reports published on various facets of the grid by the Electric Power Research Institute.
4. Indeed, there have been places where parallel distribution lines ran down streets and for which different companies sold power from each of them. Eventually, only one company remained in business. This is similar to the experience of New York’s original subway systems, where parallel tracks in Manhattan owned by different companies eventually went bankrupt.